Mangrove and Production risk in Aquaculture in the Mekong River Delta, Vietnam

Abstract

Utilizing survey data in aquaculture activities in 2014 from the Mekong river deltaVietnam, this paper aims to examine the impact of mangrove forests on profit and profit variability in extensive and semi-intensive aquaculture farms (mostly shrimp farms). The Just-Pope framework for a stochastic short-run profit function is applied to examine the impacts of inputs on both the deterministic component and the stochastic component of profit. The most crucial characteristics of mangrove forests such as the area of mangrove forests in farm, the density of mangrove trees per 100 square meter, and the area of mangrove forests within 500, 1000, and 2000, are utilized in this paper. The main estimation method is the Maximum likelihood (ML) estimator for the log-likelihood function employed to investigate the relationship between mangrove forests and profit as well as its variability. Apart from the ML estimator, other estimation methods (including FGLS, Robust S.E, and SUR) are also employed to test robustness of the regression results. The results show robust evidences that mangrove forests have negative effect and variance-reducing effect on profit in extensive and semi-intensive aquaculture farms. From these results, it implies that when converting more mangrove into water surface area, farmers earn higher profit at higher risk, and that a risk-averse farmer will plant more mangrove forests in farm than the risk-neutral farmer.